Case No. HT-11-503

Before: MR JUSTICE COULSON Between: Third Party/Part 20 Defendant - and - Case No: HT-11-423Mr Thomas Plewman (instructed by Norton Rose) for Brit Inns LtdMr William Evans (instructed by Davenport Lions) for Vincent Barber, Linda Lawless, and Stephen KatzMr Andrew Miller (instructed by Kennedys) for BDW Trading Ltd and J Reddington LtdHearing dates: 13th, 14th, 18th, 19th, 20th, 21st & 27th June 2012Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.MR JUSTICE COULSON Mr Justice Coulson: 1. INTRODUCTION 1.These two actions arise out of the flooding of the basement restaurant of The Oak in Teddington on 15 January 2007. The Oak was operated by a company called Brit Inns Limited, which is now in liquidation. The two directors of Brit Inns were Mr Vincent Barber and Mrs Linda Lawless, who continue to run a restaurant business at the premises through a different company. The flooding arose out of admittedly defective work carried out by BDW Trading Limited (better known as Barratts) and/or their sub-contractors, J Reddington Limited (to whom I shall refer collectively as “the defendants”). Action number HT-11-503 is the subrogated claim, pursuant to which Brit Inns’ insurers seek to recover the sums that they paid out to Brit Inns consequential upon the flooding. Although, unusually, Mr Barber and Mrs Lawless were also claimants in those proceedings, their claims were stayed. Action number HT-11-423 concerns their uninsured claims, many of which they pursue as assignees of Brit Inns. The liquidator of Brit Inns was joined as a party to that action because of a concern about whether proper notice of that assignment had been given. 2.The liability of the defendants for the flooding in January 2007 has never been in dispute. Thus the disputes at trial were limited to questions of causation and quantification. It is relatively unusual for such quantum-only claims, particularly when they have already been through the filter of an adjusted insurance claim, to be fought out in the traditional way in court. However, as I hope will be made clear below, there were particular features of these claims, and the documents surrounding them, which were very unusual; what ought to have been a straightforward assessment of loss became an attritional battle involving inadequate documentation, late evidence, and wrangles about the burden of proof. In those circumstances, I am grateful to all counsel for their good temper and considerable assistance. 3.I set out in Section 2 below a Chronology. Thereafter I deal with the claims under three broad heads. First, in Sections 3 and 4, I address the subrogated claims for material damage. Secondly, in Sections 5 and 6, I deal with the subrogated claim for loss of profit. Thirdly, I deal with the remaining miscellaneous claims in Section 7 below. There is a short summary of my Conclusions at Section 8 below. 2. CHRONOLOGY 2.1 The Royal Oak 4.For the best part of 20 years, until 2005, Mr Barber and Mrs Lawless ran a pub, known as The Royal Oak, at 170-172 High Street, Teddington. It was a traditional public house which did not serve much food. It is referred to at one place in the documentation as a ‘biker’s pub’. This reflected the previous experience of Mr Barber and Mrs Lawless, which was on the pub side of the business, rather than as restaurateurs. 5.Not all of the accounts prior to 2005 for the Royal Oak have been made available. By reference to those which have been disclosed, it appears that the annual turnover in 2001 was £313,529, with slightly lower figures for 2002 and 2003. Mr Barber confirmed that the figures in the withheld accounts for 2004 and 2005 would have been lower because the building and the business were run down for planning purposes. He also confirmed that the net profit for 2002 was £48,778 and, for 2003, £38,203. That was based on an average turnover of £5,300 per week. 2.2 The Development 6.Pursuant to a development agreement between Mr Barber and Mrs Lawless, BDW demolished the existing pub and constructed a new building on the site with flats above, and with a bar on the ground floor and a restaurant in the basement. Mr Barber and Mrs Lawless retained the ground floor and the basement, whilst the flats were sold off. The bar and restaurant were to be called The Oak. The restaurant was going to be very different from The Royal Oak, the aim being to create an up-market and expensive restaurant business on the site.7.The development works involved, amongst other things, the tanking of the basement and the construction of a concrete slab. The shell of the basement and ground floor was completed by May 2006. They were then handed over to Mr Barber and Mrs Lawless, in order that they could then carry out the fit-out works. It appears that these fit-out works commenced in about July 2006. 2.3 The Original Fit-Out Works 8.The original fit-out works were relevant to the issues in these proceedings because it was said that their cost demonstrated the unreasonable nature of the costs subsequently claimed for the reinstatement fit-out works, following the flooding. The original fit-out was not the subject of a fixed price contract. There was no specification and no bill of quantities. It was therefore not always easy to discern precisely what was carried out first time around. There was, however, a large lever arch file full of invoices rendered by a wide variety of sub-contractors and consultants. 9.Although he had no construction experience, Mr Barber was the project manager. However, day-to-day control of the work seems to have been in the hands of Mr Stuart Penny, trading as SP Contracts, who acted as a Clerk of Works and was apparently on site most days. He was, he said, responsible for scheduling the works, carrying out the quantity surveying work, the purchasing of materials, the engaging of labour, the co-ordination of the trades, as well as contractors and sub-contractors, overseeing the works, and checking on the quality of the works. In carrying out this wide-ranging role, Mr Penny kept no records, other than a diary, which he said he routinely destroyed after the job. The evidence demonstrates that, for carrying out this work, Mr Penny rendered two invoices that totalled around £12,242. 10.The total cost of the original fit-out works was the subject of some debate. The only detailed analysis was that rather belatedly carried out by the defendant’s expert, Mr Thomas. His updated schedule arrived at a figure of £279,229 for the original fit-out works in the ground floor of the basement. He arrived at this figure by totalling the invoices with which he had been provided by the claimants and deducting those which were palpably not connected with the original fit-out works. 11.The £279,229 figure referable to work over two floors, was significantly less than the £390,000 odd claimed by Brit Inns for the subsequent reinstatement fit-out works to the basement only. Thus Mr Thomas relied on his analysis of the original costs as one way of demonstrating that the claimed costs in these proceedings were simply too high. It therefore became necessary for Mr Plewman to cross-examine Mr Thomas on his exercise. Although he did so with considerable forensic skill, he was unable to mask the fact that such criticisms as could be made of Mr Thomas’ exercise all stemmed from a single source, namely that the bundle of invoices (which the claimants themselves had provided) in respect of the original fit-out works might not have been complete or comprehensive. That, of course, was hardly Mr Thomas’ fault. 12.During the cross-examination of Mr Thomas during the morning of Day 5 (20 June 2012) it was suggested that the claimants may not have provided all of the invoices relating to the costs of the original fit-out. However, it was difficult to form a concluded view about the degree of incompleteness. By way of example, Mr Thomas properly acknowledged that there were no invoices in the bundle from someone calling themselves a painter, but, as he correctly pointed out, painting could have been carried out by one of the other trades. The same was true for the tiling work. And, although he said that some of the invoices from particular contractors seemed to be stated on a percentage basis, and the invoices for part-payment did not always come to 100%, he thought that that could be explained by the fact that at least some of the works were never completed (a fact borne out by the evidence of Mr Barber, amongst others). 13.Accordingly, although Mr Thomas properly accepted that he could not say that his analysis was exhaustive, I find that it was as complete as it could be, based on the information with which he had been provided by the claimants. In those circumstances, I find that, on the balance of probabilities, the cost of the original fit-out works was not materially in excess of his figure of £279,229. Even giving the claimants the benefit of the doubt, arising from the points put by Mr Plewman, there is no evidence to suggest that these matters would have increased the original fit-out costs to anything over £300,000. 2.4 The First Inundation 14.By 10 December 2006, the fit-out works were largely completed, although there is no reliable evidence as to precisely what remained outstanding. Some important elements of the works had yet to be completed; according to Mr Barber, this included the extensive panelling in the bar and the oak flooring in the basement restaurant area. Although it was Mr Barber’s evidence that they intended to open just three days later, on 13 December 2006, it seems clear that, even then, this was not a definite date: it was, to use his word, an “assumption”. It does not appear that there was going to be any particular launch event to mark the planned opening on 13 December.15.The reason why the precise state of the fit-out works at this time is important is because, on 10/11 December, the basement was flooded due to the negligence of Thames Water, who failed properly to cap off the mains water supply whilst making the connection to the property. This failure was not, and was not alleged to be, the responsibility of the defendants. But it had an effect on the subsequent claim made against them arising out of the second inundation, in January 2007, which was their responsibility. That is because, following the flood on 10/11 December, there was some considerable stripping out works. These works, and their attendant costs, cannot in fact or law form part of the claim against the defendants. 16.The record of precisely what happened between 10/11 December and 15 January 2007 (when the second inundation occurred) is very sketchy. There are some general assertions in the witness statements, and some contemporaneous records, including photographs of the basement floor. Taken together, I find that these show extensive stripping out, with a good deal of remedial work still to be carried out by 15 January. That latter finding is borne out by the fact that, according to Mr Barber, it was thought in early January 2007 that the restaurant and bar could not open until a date in March. In other words, the first inundation created stripping out and reinstatement works that were going to take almost three months (10 December – 6 March) to complete.17.Mr Penny was engaged to carry out similar services in relation to the works necessitated by the first inundation in December 2006. Indeed, this was simply a continuation of that which he had been doing, because of course the original fit-out works had not been completed by 10/11 December. According to his invoices, Mr Penny charged £26,532.25 for his work in connection with the first inundation. This was twice what he had charged for the whole of his involvement with the original fit-out works, which had lasted 5 or 6 months, and taken place over two floors. It was impossible to see how the sum of £26,532.25 could be justified, in circumstances where the work necessitated by the first inundation came to an end on 15 January 2007, when the second inundation occurred. Although the relevant period was therefore just over one month, Mr Penny’s invoices worked out at a total of 132 man days. Mr Penny agreed that “there must be something adrift somewhere” but, beyond that, he was not able to explain what appeared to be a very large discrepancy. This was relevant to the issues which I have to decide because of the subsequent allegations of overcharging by Mr Penny in connection with the second inundation.18.Notwithstanding this apparent discrepancy, however, Mr Penny was paid the £26,532.25 in full by Brit Inns’ insurers, on the recommendation of their loss adjuster, Mr Jamie Greig. In fact, the insurers paid out a total of £205,546.93 to Brit Inns for the consequences of the first flood, on top of a sum of £50,000 paid directly by Thames Water. 2.5 The Second Inundation 19.The second inundation (as it was rather whimsically called in the documents) occurred, or was at the very least discovered, on 15 January 2007. It is common ground that this flooding was caused by the defendants’ defective workmanship in installing the damp-proof membrane during the original development works in 2006. Barnard Associates, the consulting engineers appointed by the defendants, accepted the defective workmanship and, in turn, the defendants accepted that it was liable to Brit Inns for loss and damage resulting from that defective work. 20.In general terms, what happened following the second inundation was this. Whilst the defendants and Barnard gave consideration as to the most effective form of remedial work, Brit Inns embarked on a second stripping-out exercise. Mr Penny talked about the stripping-out works being carried out over a fortnight, although it was unclear when precisely that was. There was also a suggestion that the stripping-out works were carried out in something of a rush. That was curious; no urgency was in fact required, because it was not until 12 April 2007 that final approval was given to Barnard’s recommended remedial solution. 21.That solution, which had first been proposed at the end of February 2007, involved the use of a Delta Drain. This consisted of both vertical and horizontal drains, in the form of an egg-box construction, which allowed the water to run down inside the floor and walls and then be pumped away. This obviated the need to dig out the entirety of the basement and to lay a second membrane, but it plainly gave rise to additional considerations once the drains had been installed. For example, false timber walls were necessitated, and the floor level was raised by 2 inches. 22.The installation of the Delta Drain, and the associated structural works to the basement, were carried out by the defendants at no cost to Brit Inns. On about 12 June 2007, the basement was then handed back to Brit Inns in order that the reinstatement of the fit-out works could commence. In many ways, what was handed back to Brit Inns in June 2007 – the concrete shell – was very similar to what they had been provided with in June 2006, save that, for the reasons noted above, the Delta Drain was going to require particular works around the walls, and a raised first floor level. 2.6 The Reinstatement Fit-Out Works 23.It is not clear what (if any) preparatory works were undertaken by Brit Inns prior to June 2007 in relation to the reinstatement fit-out works. Certainly, no schedule of the proposed fit-out works was prepared, either then or subsequently. It may be that this was because, to a very large extent, the reinstatement fit-out works were going to be a re-run of the original fit-out works, and were to be carried out by the same direct contractors. Whilst it is agreed in these proceedings that it was not unreasonable for Brit Inns to approach the reinstatement fit-out works on the same basis as the original, using what were called “direct appointments”, without a specification or detailed schedule of works, this was said to be because that was how the original fit-out works had been performed. What nobody seems to have thought about was the need to keep a record of the reinstatement fit-out works actually carried out. I consider this to be a surprising omission given that, because of the early insurance claim made by Brit Inns, the reinstatement fit-out works were very different from the original in one important respect: they were going to be ultimately paid for, not by Brit Inns, but by a third party.24.The absence of any proper record of the reinstatement fit-out works being carried out by the sub-contractors was exacerbated by the vague nature of the responsibilities of the relevant individuals, and the haphazard way in which they were carried out. Mr Barber was again the Project Manager but, as Mr Penny noted in his witness statement, Mr Barber “wasn’t really involved with the construction side of the fit-out…and didn’t come to the site regularly”. Mr Barber accepted that he did not go to the site regularly; that he was not involved in the detailed construction works; that he did not choose the sub-contractors; that he did not identify the scope of work or produce a specification; that he did not agree the rates payable to the sub-contractors and that he did not order the bulk of the materials. To the extent that these things were done at all, they were done by Mr Penny, although a number of these services (such as the production of any sort of record of the works being performed, or the provision of any real quantity surveying services) were notable by their absence. 25.One important matter flowing from the rather ad hoc way in which the reinstatement fit-out works were carried out relates to programming. The evidence was that, following the reinstatement fit-out works, Brit Inns hoped to reopen The Oak on about 15 October 2007. There was no evidence as to when that proposed date was first identified or how that date was arrived at. Mr Barber said that it was just an assumption. Given the absence of any schedule of work, this was unsurprising: how can you know when the work might finish when you don’t really know what work you are going to do?26.Mr Barber said that “one of the problems was because we didn’t know exactly what the opening date was, that is why we couldn’t do the marketing, and so on and so forth…at the end of the day, you have to have some sort of idea or guesstimate of when you are going to open”. For the reasons I have given, I find that that was, in reality, a criticism of Brit Inns’ own arrangements for the reinstatement fit-out works. Because they were never clear as to precisely what they were doing, they could not be clear as to when the works would be finished and when they might reopen. As Mr Barber confirmed, there was not a single piece of paper setting out a proposed or actual sequence of works. On the face of it, therefore, the uncertainties over the revised opening date were Brit Inns’ responsibility. 2.7 Payment for the Reinstatement Fit-Out Works 27.The evidence as to how payments for the reinstatement fit-out works were assessed and paid was also vague and, in some instances, contradictory. This also mattered for the issues that I have to decide, because the defendants complained repeatedly that there was almost nothing to say whether the invoices on which the claims were based had ever actually been paid at all. a) Materials 28.Mr Barber said in cross-examination that most of the materials were ordered and paid for by Mr Penny and that he gave Mr Penny a credit card for that purpose. There was no mention of this credit card in any of his three witness statements. There were no credit card bills or statements. Mr Barber said that he had not checked the credit card payments. Mr Penny, on the other hand, said that, although he used the credit card for buying some of the materials, “the bigger stuff Vince [Barber] would deal directly, mainly.” Mr Penny agreed that his witness statement, which claimed that Mr Barber paid directly for all materials, was wrong.29.It was therefore not entirely clear how the materials were purchased. It certainly appears to have been an ad hoc arrangement, without any proper system of checks or controls. b) Contractors/Labour 30.It was Brit Inns’ case that the contractors, including SP Contracts, rendered invoices which Mr Barber then paid with a cheque. There were two difficulties with this. First, Mr Barber was plain that he did not go through each of the invoices and relied, he said, on what he was told by Mr Penny. Mr Penny’s evidence in relation to the invoices was very vague but he assured me on at least two occasions that he did not see all the invoices, let alone go through and check them. Accordingly, I find that invoices were considered for payment and/or paid without any check having been done on whether the work to which the invoice related had actually been performed. 31.Secondly, although the evidence was that Mr Barber paid all the contractors by cheque, copies of just two cheque stubs were provided to the defendants on disclosure. No bank statements of any sort were provided and there were no proper records of the many payments which, according to Mr Barber, he made in cash. It did not therefore follow that the fact that there was an invoice in the bundle meant that that invoice had actually been paid by Brit Inns. c) Total Figure 32.The total which Brit Inns said they paid on the invoices rendered in respect of the reinstatement fit-out works was £396,502.38. That sum formed the basis of their insurance claim. As we shall see, the experts have recently agreed that this figure was at least £100,000 too much. But in my view, alarm bells should have been ringing much earlier. As noted in paragraph 13 above, the original cost of the fit-out works on both floors was not more than £300,000. On that basis alone, a figure of £400,000 odd for just one floor must have looked much too high. When the point was put to Mr Penny in cross-examination, and he was asked how the figures could possibly be reconciled, he confessed the he did not know. He gave the same answers in relation to the contractors: on the face of the figures, far more was paid to the individual trades in relation to the second lot of fit-out works than the first. Again, in my view, there was no evidence to justify the sizable nature of the discrepancies. 2.8 The Third Incident and Thereafter 33.The Oak finally opened on about 17 October 2007. Between the middle of October to the end of December 2007, the actual sales generated by The Oak averaged £7,059 per week. This compared favourably with the earnings of the previous business, which may explain why Mrs Lawless described the new business as being quite successful when it first started. Indeed, in to the early months of 2008 there were also some reasonably profitable weeks, even though this is a notoriously slow time in the catering trade. In the week commencing 16 March 2008, the actual sales were £8,107, the highest-ever weekly figure. Notwithstanding that, during the first half of 2008, the average sales figure began to decline so that, from January to June 2008, the average weekly figure fell to £5,128 per week. 34.At some point during the first half of 2008 there were problems with foul smells in the basement which were eventually traced to the work of an electrician engaged by Brit Inns themselves, who had inadvertently drilled a hole in a soil vent pipe in the rear lobby area. This event, referred to in the documents as the third incident, was not the responsibility of the defendants. However, like so many other elements of this case that initially seemed unremarkable, the third incident became a hotly contested issue. The dispute arose in this way. Mrs Rawlin, Brit Inns’ expert accountant, said that the third incident, and the smells caused thereby, triggered the end of the period for which Brit Inns could claim loss of profit arising out of the second inundation. She plumped for June 2008 as the relevant date when the third incident began to have an effect. The defendants agreed that the third incident could, on one view, be the end of the relevant period for loss of profit, but said that the evidence about bad smells existed considerably earlier than June 2008. 35.If the defendants were right about this, it would have had the effect of reducing the loss of profit claim (because it would move back in time the date when the third incident became the cause of any loss). So Brit Inns then argued that the earlier odour problems were nothing to do with the third incident, and were linked back to the problems with flooding that had caused the second inundation. On that (unpleaded) basis, they argued that these odour problems were the responsibility of the defendants. I am therefore required to make a number of findings of fact on this topic.36.On 15 January 2008, there was a problem with a leaking joint in the foul drain which was the subject of a temporary repair carried out on the same day. Some odours may have remained. Permanent repair works were the subject of a method statement provided by Barnard Associates on 22 February 2008 and carried out on 26/27 February 2008. On the basis of the report on 27 February 2008, it appears no leaks or foul odours were recorded thereafter.37.It would seem that, after a gap, a further odour problem became apparent at the end of April 2008 (when Mr Barber complained to his insurers). It appears that these odours were regarded by the insurers as being due to the third incident, when the soil pipe was pierced by Brit Inns’ own electrician. Although Mr Barber agreed that that was what his insurers said, he said that he disagreed with it (despite the fact that it was in his own witness statement). 38.On the basis of this rather inadequate evidence, I make the following findings of fact. There was an odour problem in January and February 2008. That problem was the responsibility of the defendants, and was dealt with by Barnard Associates on that basis. Temporary and then permanent remedial works were carried out promptly. Those odour problems did not have a material effect on turnover or sales; as noted above, Brit Inns achieved some of their best weekly figures during this very period. Thereafter, in the spring and early summer of 2008, a further odour problem materialised. That was not said at the time to be the responsibility of the defendants, and unlike the odour problem at the start of the year, was not referred to Barnard Associates. That was the third incident; the problem was due to the piercing of the soil pipe by Brit Inns’ electrician and was therefore Brit Inns’ responsibility. 39.In about June 2008, Mr Barber and Mrs Lawless closed the basement restaurant. There are no records relating to that decision, and nothing to say how it was reached. There was apparently no contemporaneous exercise carried out by reference to the actual costs and the actual sales, nor any comparison done with any projected figures. There was no record of any attempt to re-launch the restaurant rather than close it. 40.These omissions are surprising given that, as Mr Barber accepted, the closure of the restaurant in the basement of The Oak meant that Brit Inns’ profit projections were never going to be attainable. He accepted that without the restaurant, from June 2008, Brit Inns could not expect takings anywhere near those which they now say they had anticipated. In those circumstances, some evidence linking the decision to close with the ongoing effects of the second inundation would have been expected if, as it does, the loss of profit claim was going to extend beyond June 2008. There was none. 41.In fact, the restaurant never opened again in that guise. In 2009 or 2010, (no-one was sure which) The Oak was rebranded as Sammy’s Bar, an American diner and a completely different concept. The basement was used as a function room. Brit Inns were put into liquidation in December 2010. Mr Barber and Mrs Lawless however, continue to trade from the same premises as Sammy’s Bar, albeit using a different company vehicle. 42.Mr Barber was asked whether he had considered at the time what the likely turnover might be once the restaurant was closed and once the operation was rebranded as Sammy’s Bar. He said he had not. Yet despite these lacuna in the evidence, it was clear that Brit Inns continued to suggest that, at least in part, the failure of Sammy’s Bar in 2010 (when compared with what is now said to be the projected profits of The Oak) was the result of the delayed opening of The Oak in 2007. In Mr Barber’s words, “it [the second inundation] certainly still had a knock-on effect”, although he was unable to substantiate that assertion. 2.9 The Insurance Claims and Insurance Payouts 43.Brit Inns made two separate claims on their insurance in respect of the first and the second inundations. These claims were adjusted by Mr Jamie Greig of Special Risks. As already noted, Brit Inns recovered around £250,000 in relation to the first inundation (including a payment direct from Thames Water). They recovered the sum of £665,000 odd for the second inundation. That payment included £355,070 for the claim for material damage and £240,905 for the claim for loss of profit. These figures were then claimed in full in the subrogated claim. However, the evidence in this case demonstrates that these were very significant over-payments. 44.Although much was made of the need for speed and urgency in dealing with the insurance claim relating to the second inundation, so that the making of the claim itself did not affect the progress of the reinstatement fit-out works, it must be noted that Brit Inns did not make their detailed insurance claim until 2008, when the works themselves were completed and The Oak was up and running. Although Mr Greig had been involved in 2007, it was unclear precisely what his role was at that time. It was not established that he had in some way committed himself (or the insurers) to the payment of particular sums or the acceptance of particular claimed heads of loss. Accordingly, when in 2008 Mr Greig came to consider the insurance claim that had been made for material damage and loss of profit arising out of the second inundation, he had plenty of time in which to carry out a proper adjustment. 45.Unhappily, it would appear that both the claim itself, and the adjustment of it, were fundamentally flawed. As to the claim, Mr Barber indicated that he simply provided Mr Greig with the invoices in carrier bags. Although he claimed to have looked at them before he submitted them, Mr Barber’s evidence on this was extremely unconvincing. He did not say that he had sat down with Mr Penny to check whether each invoice was in respect of work that had been done at The Oak, and, for the reasons I have already explained, Mr Penny was adamant that he had not seen all the invoices. In any event, it is doubtful that Mr Penny could have provided a detailed input a year or so after the work, given the absence of any records against which he could perform any checks. Mr Barber did not carry out any independent checks himself. And although at one point he claimed to have ‘adjusted’ the claim before it was made to the insurers, he was quick to backtrack from that suggestion and accepted that he had done no such thing. 46.As to the actual adjustment, Mr Greig candidly admitted that there were items which he had accepted but which he now knew should not have been paid; that the insurers had paid out more than they should have done based entirely on his recommendation; that he should not have accepted the invoices at face value, as he did; that he should not have accepted that these costs had been incurred simply because that was what he was told; that he had failed to check the work done in respect of each invoice; that he had not asked for particulars of the labour invoices; that he had not asked for the original fit-out invoices or carried out any comparison with the cost of the original works; and that it was an oversight not to have asked for any proof of payment. Given these admissions, it was unsurprising that, as Mr Greig said, there were “elements of this claim where I am not happy with the adjustment I performed.” At another point, he said “I should have carried out a better adjustment of the material damage claimed”. 47.One of the particular problems which Mr Greig faced (and which I in turn have faced) was the complete absence of any proper record of the work actually carried out by each contractor. Mr Greig originally said that this absence was because he carried out his adjustment without Mr Penny’s help, because of a dispute between Mr Penny and Mr Barber. That seemed to me to be a somewhat flimsy reason for the inadequate adjustment, particularly as (for the reasons I have given) Mr Penny could not have provided detailed help even had he been available. The real reason for the problems was the inadequacy of the invoices themselves. 48.Moreover, Mr Greig accepted that he should have had the input of a quantity surveyor when adjusting the claim, because there was no written detail in the invoices of the works performed, and no sort of inventory of the works. Although Mr Greig claimed that the preparation of such an inventory would have caused delay to the works themselves, I reject that for the reasons already given. The preparation of such an inventory or schedule of the reinstatement fit-out work was the minimum that was required if a sensible third party claim was going to be mounted. It could have been prepared between March and June, while the Delta Drain was being installed.49.To be fair to Mr Greig, it seems to me that he was distracted by two matters which, although both ultimately irrelevant to the task in hand, clearly played their part in his failure to undertake a proper adjustment of the material damage claim. First, there was the split under the policy between material damage and the increased costs of working. It appears that Mr Greig spent some time parcelling up the claims under these two different headings, in order to ensure that claims (which would otherwise have been caught by the limits in the insurance contract for the material damage claim) could be paid to Brit Inns under the increased costs of working provision instead. This was perhaps a laudable attitude on the part of a loss adjuster but, as Mr Greig accepted, it was of no relevance to the claim now made against the defendants. In fact, as we shall see, this ‘split’ gave rise to a number of complications. 50.Secondly, there was the business interruption (loss of profit) claim. Mr Greig accepted, both in his statement and in his oral evidence, that a forensic investigation into the entire insurance claim could have been undertaken and that such investigations are not uncommon. It did not happen here because – as he accepted in cross-examination - Mr Greig became preoccupied by the sheer size of the business interruption claim. The original forecast provided by Brit Inns for their business interruption was £2.2 million1. This dwarfed the material damage claim. I find as a fact that Mr Greig was so concerned with the size of the business interruption claim that he wholly failed to give the material damage claim the scrutiny it deserved.51.Finally, on the issue of the adjustment and Mr Greig’s evidence, I should add this. In these proceedings, once the detailed problems with Mr Greig’s adjustment became apparent, Brit Inns were aware that they could no longer argue that, merely because the claim had been adjusted, they were entitled to be paid the sum produced by the adjustment. But instead of putting the adjustment to one side, and endeavouring to do the kind of objective valuation exercise which the defendants have done, they sought to hang on to the adjustment exercise, even in a reduced sum. Accordingly, Mr Greig produced a second witness statement, which purported to contain a second, reduced adjustment.52.The problems with this evidence were legion. First it was after the event, when the sums based on the first adjustment had long since been paid out to Brit Inns. It was not therefore a meaningful exercise. Second, to the extent that Brit Inns wanted to rely on the reasonableness of Mr Greig’s revised figures at trial, the material was opinion evidence, not fact, and Mr Greig was not an expert witness. Thirdly, on the basis of the agreement reached by the expert Quantity Surveyors, Mr Greig’s reductions did not in any event go nearly far enough.53.An overall impression was created of an insurance claim that was exaggerated at the outset, and which was then not properly adjusted, but which was still pursued because the alternative – an attempt at a reasonable valuation from scratch – was not even being considered. It inevitably made me ask myself why the Brit Inns claim was being pursued on such an apparently unsatisfactory basis. 3.THE SUBROGATED CLAIMS FOR MATERIAL DAMAGE/PRINCIPLES 3.1 The Proper Approach 54.Where a claimant’s property has suffered physical damage as a result of the breach of contract or negligence of a defendant, the claimant is entitled to recover against the defendant the reasonable cost of reinstatement: see East Ham Corporation v Bernard Sunley & Sons Ltd [1996] AC 406. In the ordinary case, the assessment of the reasonable cost does not require the remedial works to have actually been carried out by the time of the trial: see